An initiative aimed at easing/simplifying how business is done was launched last week. The initiative is aptly named Invest in Africa (IIA) and is private sector led. It aims at identifying and tackling challenges of doing business in Africa thereby delivering more impactful and cost-efficient solutions.
Data from the Kenya National Bureau of Statistics indicates that there are more than 17 million SMEs registered in Kenya. 98% of these enterprises contribute 25% of the Kenya’s GDP and employ upto 50% of the workforce. However, there is a 70% failure rate of SME’s within the first three years of existence hence a need for an intervention to tackle these challenges.
The initiative was first piloted in Ghana and in October 2014, they were able to launch Ghana’s first online, cross sector business portal The African Partner Pool (APP). The portal connects credible local SMEs to larger businesses and provides access to the skills and finance needed to raise standards. The successes in Ghana include; 1,300 suppliers across 20 sectors in the portal, 14 buyers transacting in the portal, value of tenders is more than USD 539 M, over 71,000 jobs potentially supported though APP, social economic impact of taxes, profits and local sourcing retained over USD 392M, over 120 SMEs have been trained, 70 have accessed funding.
IIA’s business model leverages on its unique ability to bridge the gap between large companies and SME’s by pooling resources and knowledge to create solutions to the shared barriers to growth. IIA has two flagship programmes that is African Partners Pool and Business Linkages programme.
African Partners Pool connects large and small businesses by allowing international companies to meet local content needs as well as promoting the goods and services of local companies to a wider market. Business Linkages Programme on the other hand comprises an SME Business Skills Development programme that ensures SMEs are trained in business skills and governance standards needed to access corporate supply chains.
IIA in conjunction with Strathmore Business School (SBS) conducted a study which investigated Kenyan SMEs current state and skill gaps in relation to expectations of multinationals and large corporates. This was meant to inform the curriculum for the SME training programme to be delivered by SBS. At least 300 SMEs and 30 big businesses participated in the study. Findings revealed four main areas of interest they include;
Training & capacity building for SMEs
The study indicated that high levels of education and professional qualification notwithstanding. SMEs are still challenged in their capacity to handle managerial, operational and even regulatory challenges.
IIA’s solution: Build capacity in SME’s on issues identified through the Business Linkages programme.
Financing Gaps in SMEs
The fact that there are many local banks with relaxed lending policies and innovative trade finance solutions has not improved SME’s preparedness to consume some of these products.
IIA’s solution: create opportunity and alternative market place where SMEs can access bids from big business with customized financing options.
Access & linkage between SMEs and big business
There exists a big access gap currently between big business and SMEs. Certain aspects of this divide are perceptual and not the reality.
IIA’s solution: Establish a pool of buyers and sellers
Governance of SMEs:
Majority of SMEs are formally constituted with 41% being family owned and 51% had a board in place. However, most of them had a host of challenges that point to poor governance in their businesses. Hence a need to establish and uplift governance standards of SMEs.
IIA’s solution: Vet capacity and status of SMEs to identify gaps and help build capacity.
Speaking at the launch, Patricia Ithau, Country Director IIA Had this to say, IIA’s key objective is to enable trade between larger companies and SMEs by providing better access to markets, enhancing SME skills and improving access to finance.
With the launch of the Kenyan chapter, IIA seeks to recruit 1000 SMEs and attract 20 partners on board within the course of 2016.